Slovenian lawmakers are set to approve the creation of a sovereign wealth fund that will take bad loans from the country’s banks to shore up the financial industry during the credit crisis and spur economic growth.
The fund will streamline the management of state assets by merging bodies that have so far managed more than 10 billion euros ($12.3 billion). Lawmakers will vote on it this week, parliament’s spokeswoman Karmen Uglesic said.
“The situation in the Slovenian banking system is very serious,” Prime Minister Janez Jansa told lawmakers in the capital Ljubljana today. “The creation of the sovereign holding should be able to help clean banks’ balances and boost economic growth as companies will be able to borrow more easily. This is just a first step to end the credit crunch.”
Slovenia is working to avoid being the sixth country in the euro region after Cyprus, Spain, Portugal, Ireland and Greece to seek international assistance from its European peers. The former Yugoslav nation, which adopted the euro in 2007, isn’t expected to require European aid, European Commission spokesman Simon O’Connor said yesterday in Brussels.
Slovenian banks, including Nova Ljubljanska Banka d.d and Nova Kreditna Banka Maribor d.d., are struggling with a surge in bad loans as more and more companies file for bankruptcy. The country is teetering on the brink of a second recession in three years. Nova Ljubljanska has about 1.5 billion euros of loans that will probably never be repaid, Finance Minister Janez Sustersic said on July 12.
Lenders in Slovenia are stable and solvent even though the situation is worsening, central bank Governor Marko Kranjec told lawmakers today, according to public broadcaster Radio Slovenija. Lending to the export-driven economy continued to shrink in May mainly because the biggest banks gave out less loans, the central bank said in an e-mailed statement today.
Bad loans at Slovenian banks advanced to more than 6 billion euros in April, the government’s economic institute said July 11.
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